Goods seized under Customs Act Section 110(1) must be returned if Section 110(2) deadline lapses unextended

SC held that where goods are seized under Section 110(1) of the Customs Act and no notice under Section 124(a) is issued within six months, the consequence under Section 110(2) is mandatory: the goods must be returned to the person from whose possession they were seized, unless the competent authority validly extends the period by a further six months with recorded reasons and prior intimation. SC clarified that Section 110(2) only prescribes a time limit for retention of seized goods, not for issuance of show-cause notice under Section 124; both provisions operate in distinct fields. As the requirements were not met, all eleven Revenue appeals were dismissed and the two assessee appeals against the Bombay HC judgment were allowed.

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Issues: Whether provisional release of seized goods under Section 110-A of the Customs Act, 1962 operates to exclude or suspend the mandatory operation of the time-limit and its consequence prescribed in Section 110(2) (and its proviso) such that failure to issue a show-cause notice within the statutory period does not entitle the person from whose possession the goods were seized to unconditional release.

Analysis: The Court examined the text and scheme of Section 110(2), its proviso permitting a one-time extension by the Principal Commissioner/Commissioner for reasons recorded in writing, the separate power in Section 110-A to provisionally release seized goods on bond, and Section 124 requiring issuance of show-cause notice before confiscation. The Court considered pre-existing decisions and administrative instructions, and noted the subsequent legislative amendment (Finance Bill, 2018) that inserted a second proviso excluding the six-month limit where provisional release has been ordered, observing that the appeals before it are anterior to that amendment. The Court held that Section 110(2) prescribes a mandatory outer time-limit whose statutory consequence on non-issuance of noticereturn of the goods to the person from whose possession they were seizedcannot be nullified by an interim/provisional release under Section 110-A. The power under Section 110-A is interim in nature and does not contain language or a non-obstante provision to curtail the mandatory operation of Section 110(2) as it stood at the relevant time; the only statutory mechanism to extend the period is the first proviso to Section 110(2).

Conclusion: The appeal is decided in favour of the respondent; provisional release under Section 110-A does not prevent the operation of Section 110(2) and failure to issue the show-cause notice within the statutory period entitles the person from whose possession the goods were seized to the return of the goods.

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